The regulator, in its extensive investigation, found that the company has transferred the fund among promoters, directors, and their relatives under the guise of legitimate trade activities. The deadline for retrieving the money will be within 45 days from the order.
Further, Sebi has barred key individuals and entities linked to the company from trading on the stock market for two years.
The interim order came after an investigation into allegations of fraudulent activities spanning several years. The regulator said Mishtann Foods engaged in circular trading with fictitious buyers and suppliers, many of which were shell entities controlled by the company’s directors and their associates.
“These transactions inflated the company’s financial performance on paper, misleading investors and regulators,” Sebi said in its order.
The investigation also revealed that the company had been routing funds through a web of interconnected entities. For instance, suppliers such as Arihant Corporation and Mishtann Shoppee were found to have non-existent operations but accounted for significant transactions in Mishtann’s financial statements.The company allegedly used these entities to create the illusion of business activity, while funds were being diverted to personal accounts of directors and their relatives.Sebi’s investigation also revealed that the company’s transportation costs for goods were another red flag, where it claimed to incur no transportation expenses, an assertion contradicted by statements from related parties.
The regulator’s probe also found inconsistencies in the company’s inventory records, with substantial discrepancies between declared stock and actual holdings.
Mishtann Foods has been asked to provide a detailed plan for returning the diverted funds. The company’s promoters, directors, and auditors face ongoing scrutiny, with potential criminal proceedings under the Sebi rules.
